On politics in the Golden State

No estate tax revenue for California in fiscal cliff deal

The agreement reached in Washington to avert the so-called fiscal cliff is generally good news for California finances, but it's still going to take a bite out of Gov. Jerry Brown's budget plans.

Legislation signed by President Obama on Wednesday won’t allow states to keep a portion of revenue from the federal estate tax, a levy on wealth inheritance.

California hasn’t received any revenue from the tax since 2004, and analysts doubted Congress would reverse course and restore the money. But Brown administration officials and Democratic lawmakers included the revenue when calculating the state’s current budget plan anyway.

Norton Francis, who researches state and local finances at the Tax Policy Center in Washington, said representatives on Capitol Hill did not seem willing to start sharing estate tax revenue with states again.

“It wasn’t part of the [Obama] administration’s plan,” he said. “It was never part of any of the other proposals.”

The result means it will be harder to balance California's next budget than Brown administration figures suggested last year. Officials previously estimated receiving $335 million from the tax over the next year and a half.

The situation also affects the state's long-term financial plans, because officials projected that the tax would generate an increasing amount of money for California over the next few years. They estimated nearly $1.2 billion in revenue in the 2015-16 fiscal year.

[Updated 5:25 p.m.: H.D. Palmer, a spokesman for Brown's Department of Finance, said administration officials already figured out a way for the state to get by without the estate tax money. He declined to provide additional details, and the governor is scheduled to unveil his new budget proposal next week.]

Missing out on estate tax revenue does not throw California finances completely off track. The nonpartisan Legislative Analyst's Office, which hasn't included the money in its own estimates, said the state could still see budget surpluses in the coming years.